It is that time of the year again. It is time to settle your 2018 account with the IRS and the state taxing authorities. It is always surprising to me how many taxpayers focus on whether or not they are getting a refund instead of how much they are paying in taxes (their tax burden) throughout the year.
Even with good tax planning, sometimes there is no refund or worse, you owe money to the IRS or the state taxing authorities. I personally prefer owing money to the IRS; that means that I used that money a little longer than if I had sent it to the IRS during the year. If I get a refund, that means that I "loaned" money to the IRS during the year and did not earn any interest on it. In that context, which do you prefer?
Of course, you do not want to owe the IRS or state taxing authorities so much money that you have to pay penalties and interest on the amounts that you should have paid throughout the year.
Lowering your tax burden should be the goal, not increasing your refund. This is where good tax planning is important. Now that the new tax law is in effect, it is easier to plan your tax burden for the coming year. Ask your tax professional to assist you with estimating your tax burden for 2019 when you review your 2018 returns.
You may also want to schedule a tax planning session with your tax professional or financial planner after tax season to identify tax reduction strategies that might benefit you.